Why SodaStream is Fizzling

NEW YORK (TheStreet) - Perhaps SodaStream's (SODA) clever marketing tactic poking fun at Coca-Cola (KO) bottles has finally backfired.

Late Wednesday, the world's largest beverage maker announced plans to get into single-serve at-home beverage making by purchasing a 10% stake in Green Mountain Coffee Roasters (GMCR), owner of the Keurig brand, for $1.25 billion.

The Atlanta-based Coca-Cola said it was purchasing 16,684,139 newly issued shares of Green Mountain Coffee for $74.98. The investment is expected to close in March.

The companies signed a 10-year agreement to collaborate on the development and introduction of Coca-Cola's brand portfolio for use in the launch of Green Mountain's forthcoming Keurig Cold, an at-home cold beverage system, which will clearly will compete directly against SodaStream.

SodaStream shares were tanking 9.9% in post-markets trading to $32.25 after its big competitor made the announcement. Green Mountain shares were surging 36% to $109.99 in post-markets. Coca-Cola shares were rising 0.64% to $37.85.

The companies said in the joint press release that Coca-Cola will be the Keurig Cold's exclusive partner for the production and sale of Coke-branded single-serve, pod-based cold beverages. The two companies will also explore other opportunities to collaborate through the Keurig platform, they made sure to add.

"This agreement demonstrates our creative approach to partnerships and ability to identify and stay at the forefront of consumer trends driving the industry. By pairing The Coca-Cola Company's brand leadership and global footprint with GMCR's innovative technology, together we will be able to capitalize on the many exciting growth opportunities in the single-serve, pod-based segment of the cold beverage industry," said Muhtar Kent, Coca-Cola's chairman and CEO. "Importantly, this partnership provides our consumers with a convenient way to enjoy the brands they love through in-home preparation."

Green Mountain expects to launch Keurig Cold in its fiscal 2015 year. Keurig Cold will be able to dispense freshly-made cold beverages including carbonated drinks, enhanced waters, juice drinks, sports drinks and teas in consumers' homes, similar to the hot beverage system Keurig has made so popular with consumers.

So what does this mean for Israeli-based SodaStream? This is a big Oh, F moment for them. With the lion in the beverage industry now claiming its piece of the at-home beverage making trend, they'd best be finding some additional growth avenues.

Coca-Cola just showed its small competitor Who's Who in the beverage world.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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